WT/WGTDF/W/96  
 
25 May  2020 
(20-3782) Page: 1/2 
Working Group on Trade, Debt and Finance    
 
EXPERT GROUP MEETING  ON TRADE FINANCE – 19 MAY 2020  
INFORMAL REPORT BY T HE WTO SECRETARIAT  
1.1.  The Expert Group discussed the evolution of the trade finance situation since its last call on  
30 March 2020 . This call was organized by the WTO Secretariat in collaboration with the International 
Chamber of Commerce 's (ICC) Banking Commission Secretariat. It benefited from the participation 
of leading global and regional banks involved in trade finance, representatives of export credit 
agencies, p rofessional organizations, and multilateral development banks.  
1.2.  The meeting held on 30 March  had revealed significant operational problems hindering the 
supply of trade finance during lockdowns. Legal documents necessary for the processing of trade 
finance  transactions were either delayed (customs documents, invoices, bills of lading) or not 
transmitted at all. Also, serious liquidity issues had appeared in many parts of the world.  In some 
regions, trade credit/payment guarantees  were in greater need than l iquidity.  
1.3.  On 19 May, the WTO Secretariat reported progress in raising the international profile of trade 
finance, even though the topic was only one in many trade -related urgencies requiring leaders ' 
attention. Several statements highlighted concerns about the decline in the supply of trade finance, 
such as the IMF and WTO heads ' statement on trade restrictions on medical supplies and food. Trade 
finance appeared also in statements made by G20 Ministers of Finance. It was expected that trade 
finance be raised during the Busine ss roundtable of B20 and ICC leaders.  
1.4.  The Expert Group on Trade Finance signalled an improvement regarding the operational and 
legal issues which had been mentioned at the previous meeting . The situation regarding the 
expedition and reception of trade -related documents had almost returned to normal, allowing banks 
to proceed with scheduled financial settlements. There had been no or few cases of "force majeure " 
invoked in trade finance transactions. Improvements owed to the acceleration of document 's 
digitization, the relaxation of certain requirements (such as those of the International Chamber of 
Commerce regarding the presentation of compliant documentation) and greater flexibility provided 
by local authorities. The digitization process was uneven though , across types of documents 
(shipping documents being less digitized), and countries (digital divide).  
1.5.  With operational issues being gradually resolved, the deterioration of credit risk was at the 
centre of trade finance concerns. Banks acknowledged that g overnment sponsored schemes (such 
as trade loan extension, repayment holidays, undertakings and credit guarantee schemes) offered 
significant relief, particularly on the main routes of trade. Credit insurance schemes were 
determinant in supporting receivab le finance and other forms of trade finance which were used in 
supply chain trade, notably by SMEs, thereby contributing to avoid the collapse of such supply 
chains.  
1.6.  However, the longer the crisis lasted, the higher the credit risk. Credit risk was alread y high 
for cross -border activities such as airlines, aeronautics, tourism, and the automotive sector. 
Sovereign risk often added to deteriorating corporate risk. In such circumstances, liquidity focused 
on core customers – leaving geographical existing gap s to expand further, and on the larger 
customers, which needs absorbed large shares of credit lines. As in previous crises, the challenge 
was to channel liquidity and credit guarantees to SMEs. Several ideas and experiences to facilitate 
this have been men tioned, such as reducing risk weights on SME risk in the Basel III framework, 
expanding US dollar swap agreements beyond the fourteen existing agreements of the US Federal 
Reserve, or promoting a credit insurance "shield " such as the one applied by Germany  in support 
trade and receivables finance. T he increased demand by importers and exporters for bank support WT/WGTDF/W/96  
 
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  did not require only more liquidity and guarantees, but also capital, as the unavoidable increase in 
risk weights will render trade finance operatio n more capital intensive for financial institutions.   
1.7.  Multilateral development banks had been in the "field" from day one, filling some of the gaps 
left by a withdrawing financial system. The International Finance Corporation had received support 
from its Board of Directors on its trade finance program, which was integral to the World Bank Group 
crisis response, in supporting the imports and exports of essential goods and commodities of the 
poorest countries. Demand for IFC trade finance facilities had incr eased by 110% since the start of 
the crisis. The African Development Bank supported local banks in their requests to have letters of 
credit endorsed internationally. Supply chain finance programs of the Asian Development Bank, the 
EBRD, the IFC were in ver y high demand, reflecting the effort to preserve the export capacity of 
developing countries in their countries of operation. The Islamic Trade Finance Corporation was also 
working through local financial institutions to support SMEs across its membership.   
1.8.  In sum, it was expected that the trade finance situation would remain challenging in the months 
to come, as country and corporate risk would continue to deteriorate, defaults of payment would 
materialize, and at the same time the demand for trade (hence for trade finance) would pick up with 
the "reopening " of many economies. Attrition of supply and growing demand could only result in 
expanding gaps. The greatest challenge was to maintain if not boost supply in developing countries, 
as multilateral develop ment banks already do much for the poorest countries, but also face 
significant excess demand from a growing number of middle -income countries.   
1.9.  The expert view expressed in the two previous meetings, according to which more international 
coordination amon g public sector actors (WTO, multilateral development banks and export credit 
agencies) and between the private sector and the public sector (WTO, ICC and B20) would be much 
desirable for the effectiveness of the policy response, has not changed.  
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